Shareholders should have the ability in contested corporate board elections to vote on one ballot for any combination of management and dissident nominees that investors believe will foster long-term shareholder value, according to a Council of Institutional Investors petition Wednesday to the SEC.
The CII asked the Securities and Exchange Commission to amend rules “so that each side in a contest can distribute 'universal' proxy cards listing all director nominees, (which) would give shareholders freedom of choice to vote for any candidate, regardless of his or her slate,” said Ann Yerger, CII executive director, said in a statement about the petition. “It would also ensure a fairer, less confusing and less cumbersome voting process.”
“Currently, shareholders have extremely limited ability to vote (on) nominees from different slates,” the statement said. “That is because the SEC's 'bona fide nominee' rule, adopted in 1966, requires opposing sides in a proxy contest to obtain the consent of opposing candidates before they can list them. Usually at least one side refuses to give consent and both sides distribute separate proxy cards listing only their nominees. Shareholders can vote using only one card. If they want to 'split their ticket' — vote for candidates from both slates — they have to vote in person at the annual meeting, which can be impractical and costly.
“The SEC's 1992 'short slate' rule provides a carve-out from the consent requirement when a shareholder nominates candidates representing a minority of the board. In such cases, dissidents can list their preferred combination of shareholder and management nominees. But the short slate rule does not allow for full 'mix and match' capability.”
Glenn Davis, CII director of research, wrote in a nine-page letter to Elizabeth Murphy, SEC secretary, “We believe the reform being requested would result in (little) changes in costs for proxy contest participants, and that the benefits to the shareholder voting franchise would far outweigh those costs.”
CII hasn't received a response from the SEC. It's “too soon,” Amy Borrus, CII deputy director, said in an e-mail.
SEC officials declined to comment on the CII request, said Judith Burns, SEC spokeswoman, in an e-mail.